Distressed inventory is used in hotels to refer to rooms that are not expected to be sold at full price. For these rooms, hotels often significantly reduce prices to encourage consumers to book last-minute and to avoid their rooms going unoccupied.
Inventory can become distressed for a number of reasons, but the most common is cancellations in close proximity to the booking date.
After all, it is better to make a little less money on a hotel room booking than to make none at all, isn't it? What is the value of a hotel room if it is empty? The answer, of course, is zero.
Also, a hotel that is full to capacity is good for business in other ways.
It conveys the impression that there is always high demand for rooms there. This can enhance a hotel's reputation both locally, regionally and nationally (and sometimes even internationally).
And don't forget, when people stay at a hotel, they don't just pay for the room. Other revenue can be generated from food services, recreational activities and through other ancillary in-house spending. Sometimes, the discounted amount of money on a reduced price room can be made up through the late-coming guests' extra expenditure.